Audio Clips

28 June 2011

Spontaneous Order

John Stossel recently wrote a great article on spontaneous order, the libertarian principle that millions of human actions will create order without the need for a top-down centralized body making thousands of rules. I liked the article so much that I'm going to post the whole thing here.

You are our Ruler. An entrepreneur tells you he wants to create something he calls a “skating rink.” Young and old will strap blades to their feet and speed through an oval arena, weaving patterns as moods strike them.

At last January’s State of the Union, President Obama said America needs more passenger trains. How does he know? For years, politicians have promised that more of us will want to commute by train, but it doesn’t happen. People like their cars. Some subsidized trains cost so much per commuter that it would be cheaper to buy them taxi rides.

The grand schemes of the politicians fail and fail again.

By contrast, the private sector, despite harassment from government, gives us better stuff for less money—without central planning. It’s called a spontaneous order.

Lawrence Reed, president of FEE, explains it this way:

“Spontaneous order is what happens when you leave people alone—when entrepreneurs . . . see the desires of people . . . and then provide for them.

“They respond to market signals, to prices. Prices tell them what’s needed and how urgently and where. And it’s infinitely better and more productive than relying on a handful of elites in some distant bureaucracy.”

This idea is not intuitive. Good things will happen if we leave people alone? Some of us are stupid—Obama and his advisers are smart. It’s intuitive to think they should make decisions for the wider group.

“No,” Reed responded. “In a market society, the bits of information that are needed to make things work—to result in the production of things that people want—are interspersed throughout the economy. What brings them together are forces of supply and demand, of changing prices.”

The personal-computer revolution is a great example of spontaneous order.

“No politician, no bureaucrat, no central planner, no academic sat behind a desk before that happened, before Silicon Valley emerged and planned it,” Reed added. “It happened because of private entrepreneurs responding to market opportunities. And one of the great virtues of that is if they don’t get it right, they lose their shirts. The market sends a signal to do something else. When politicians get it wrong, you and I pay the price.

“We have this ingrained habit of thinking that if somebody plans it, if somebody lays down the law and writes the rules, order will follow,” he continued.

“And the absence of those things will somehow lead to chaos. But what you often get when you try to enforce mandates and restrictions from a distant bureaucracy is planned chaos, as the great economist Ludwig on Mises once said. We have to rely more upon what emerges spontaneously because it represents individuals’ personal tastes and choices, not those of distant politicians.”

No comments:

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen. - Frederic Basiat

Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things. - Adam Smith

The desire of bettering our condition, a desire which, though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go into the grave. - Adam Smith

Concentrated power is not rendered harmless by the good intentions of those who create it. - Milton Friedman